Felix Salmon: Goldman Sachs’s reputation is tarnished

Writing in the Washington Post, Felix Salmon says that the SEC’s charges against Goldman Sachs have tarnished the firms reputation.

The SEC, in making its complaint public instead of trying to quietly settle with Goldman, has used its subpoena power to put an end to the firm’s reputation once and for all. Among other things, the agency uncovered a series of damningly glib e-mails from a trader who referred to himself as “the fabulous Fab.”
And so far, Goldman’s desperate response has only made matters worse. It tried to paint a veteran saleswoman as someone who couldn’t understand simple e-mails about corporate structure. It used the word “sophisticated” 18 times in a single document, trying to shift the blame onto the victims of its scheme, because, well, they were sophisticated. And when its general counsel came onto its quarterly earnings call last Tuesday, he refused to answer most questions. The overriding impression Goldman is creating is one of a panicked company caught with its pants down — not of a professional banking organization rising effortlessly above the fray.
Goldman’s clients have known for years that the long-term-greedy investment bankers of the past were being marginalized by the short-term-greedy traders who have taken over the company’s upper echelons. But the company’s mystique overwhelmed this knowledge. Clients flocked to Goldman anyway, sometimes against their better judgment.
They won’t be doing that anymore: Goldman’s competitors will make sure of it. On the Friday that the SEC charges were announced, and again on the following Sunday, Blankfein left voicemail messages for all the firm’s employees, saying, in his characteristically combative way, that Goldman would fight the charges.

Ultimately, what a bank sells is trust so once you lose that, you’re out of business. Still, I think Felix overstates the case against Goldman. This isn’t over by along shot and Goldy still has a large reservoir of respect and admiration on Wall Street.
I’ve said before that Goldman has become the SEC’s “Great White Defendant.” I don’t think Goldman is a Buy but I wouldn’t sell them short either, literally or figuratively.

Posted by on April 23rd, 2010 at 10:47 pm


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